Mr. Speaker, once again, welcome back to the chair. It is nice to have you here after the summer break. It is certainly your privilege and pleasure to be in the chair while I give my dissertation on Bill C-38.
First, I thank the hon. member for bringing to the attention of the House that it is the birthday of the late Right Hon. Mr. John Diefenbaker. It is not just useful information for members of the House, but for Canadians in general. We recognize the importance of Mr. Diefenbaker and the Conservative Party back when Mr. Diefenbaker was the leader, and certainly the history that the Conservative Party brought to this country all the way back to Confederation. I thank the hon. member for drawing that point to the attention of the House and to Canadians.
I have the pleasure of standing before the House today to speak to Bill C-38. I should also indicate that this is a responsibility that was given to me just recently.
Recently, the previous member for Kings—Hants, Mr. Scott Brison, was the one who had carriage of this particular portfolio in this piece of legislation to this point. I can mention his name in the House now as he is not a member. I would like to thank him on behalf of our party for all that he has done for us as well as for Canadians in putting forward what I consider to be the best of the critics' responses to the Minister of Finance. I would almost suggest that the Minister of Finance would agree with me on that comment. Mr. Brison is no longer a sitting member of the House because he gave his seat to an individual who is of the same stature as the Right Hon. John Diefenbaker, the Right Hon. Joe Clark who will be sworn in tomorrow. We thank him for his sacrifices and his diligent work.
It is my duty today to speak to Bill C-38 on behalf of the Progressive Conservative Party. I am sorry I was not able to speak after the member for Regina—Qu'Appelle because it was very important that there be some sort of segue from the NDP ideology and the Progressive Conservative ideology with respect to the banking industry.
I have a lot of respect for the member for Regina—Qu'Appelle, make no mistake about that. He is an individual who has been in the House for a number of years and is certainly very familiar with the issue of finance as he sat on the finance committee for some time. I look forward to working with him as well as with the other members of the finance committee and the Minister of Finance.
The member for Regina—Qu'Appelle certainly espoused his party's ideology with respect to the banking industry and this particular piece of legislation to the point that I almost thought that he would suggest that the nationalization of the banking industry would probably be better for Canadians than having it on an open market basis in the free market system that we now have. That may be a bit insensitive, but I suspect it is probably closer to the truth.
The banks are not the bogeymen in this scenario. The banking industry in Canada is very important not only to us but to our economy. I am sure Canadians recognize that the banking industry itself employs approximately 222,000 Canadians. It is a huge industry that is regulated by legislation. It comes on a regular basis every five years to get legislation changed so that it can operate within those regulations.
The banking industry also has an estimated annual payroll of some $12.6 billion. This is very important for the people who are employed in the industry as well as to governments which obviously tax the people who are employed in that industry.
The banking industry we have today has more than $1.4 trillion in assets. It has over 8,423 branches across the country. It is a huge industry. The banks are not the bogeymen. They are simply an industry trying to do business in Canada.
The banks today generate more than 49% of their earnings outside Canada. Fifty per cent of what the banks earn come from outside the borders of the country. That speaks to the globalization of the financial industry as well as the banking industry.
The really interesting point is that one out of every two working Canadians in some way, shape or form has an interest in a bank. Either directly or indirectly, he is stockholders and shareholders in the industry. Whether it is through a pension plan, through individual stock trades, through mutual funds, or through other types of financial vehicles, one out of every two Canadians has a direct or indirect connection with the stock of a bank.
The legislation which has come forward is very comprehensive. It has 900 pages and takes into consideration 22 separate statutes in the federal government. It deals with approximately 4,000 pages of those 22 statutes with amendments to those pieces of legislation.
I have with me the bill of 900 pages. I anticipate the clause by clause study of the 900 pages of Bill C-38, but in the meantime, I am very pleased to speak to the bill and will try to speak to some of the issues reflected in the bill.
The member for Regina—Qu'Appelle spoke articulately of what was good and what was bad within the bill. I could accept a lot of what he said with respect to good and bad, although I could not accept a lot of the other areas he went to with respect to ownership being raised from 10% to 20%. He was totally opposed to that and I will get into that later. We are not opposed to that at all.
He also said he would not support nor vote for this piece of legislation to go to committee. I find that very strange because there are a number of good issues dealt with in the legislation. We should be supporting it and taking it to the committee level so that we can make the necessary changes, as long as the government and the people on the committee are prepared to listen to good, constructive amendments and changes being proposed. We will get into those certainly at a much later date when we deal with them in committee.
We in the PC Party have been waiting for this piece of legislation for a long time. It is long overdue. We have been waiting for several years to have the legislation on the table. In saying that, I will also state the intention of the Progressive Conservative Party to support the legislation at second reading to get it to the committee stage so we can try to make those necessary changes.
It has taken an awfully long time for the legislation to come forward. It has been almost seven years that the government has been in power. It has been almost seven years since the government has gone through the delaying tactics of task forces, of consultations, of special reports, of any other type of delaying tactic before it could come to the table.
We have heard already that this process started back in 1996 with the MacKay task force. That report was presented to the Minister of Finance on September 14, 1998. It has been over a year since the task force reported to the finance minister and the white paper was dealt with and we are at second reading on September 18, 2000. It has been two years since the MacKay report was presented to the Minister of Finance and we finally have the bill on our desks, a fairly long delay.
In the meantime the Minister of Finance also said to the banks that they would not be allowed to merge. Even though the MacKay report spoke specifically to that issue, I guess the Minister of Finance was caught off guard when some of the banks brought forward their proposals for mergers with other banking corporations.
For over 100 years Canada has enjoyed a competitive advantage over the U.S. in terms of a much more enlightened system of banking regulations. In a previous life when I actually had a real job as opposed to simply standing in the House and speaking to you, Mr. Speaker, and enlightening you and obviously making your day much brighter because of that, I did have the opportunity of working with a corporation that needed the banking institutions that this country has. We were very competitive not only in Canada but also in the United States because we had the ability of dealing with a national bank within this country. We had the ability of generating capital that would not necessarily have been generated within the banking system of the United States.
We in Canada have been very fortunate to have the banking industry we have. For example, in 1987 the Conservative government allowed banks to acquire security firms and five years later, cross ownership was permitted across all four pillars of the financial system: banks, security firms, insurance companies and trust companies.
The opening up of Canada's securities industry in 1987 allowed banks to strengthen the sector thereby maintaining a viable domestic industry. At that point we were the strongest of the banking industries anywhere on the globe. That has changed. We now have some difficulty maintaining the global competition and we will speak to that. In fact this legislation starts to speak to that issue.
Then over the course of the 1990s Canada lost its competitive advantage as U.S. regulators moved to an unrestricted Canadian style system of national banking. As it stands now, the regulatory environment south of the border is far superior to that of Canada's.
Last fall a major new financial bill was passed in the United States which allowed for cross ownership of banks, security firms and insurance companies plus cross selling of services. This means that the bank merger process in the United States does not have to include any public hearings and little political input. In fact a recent wave of mega mergers has reshaped the U.S. banking sector.
Mr. Speaker, we of the elder generation, and I put myself in that category as well, perhaps have not kept up with the changes in the banking system, but banking has changed. Today we do not have to walk into a bank in order to access all of the services we require. We can do all of our banking at a computer terminal. We can do most of our banking by telephone. We can do most of our banking without even having to talk to a banker with respect to loan guarantees, with respect to accessing the loans that are required to maintain business and personal services. That is what we are speaking of and it is not really reflected in this legislation just yet, but we are getting there.
For Canadian banks, any interbank merger is subject to high level political open-ended scrutiny. It would be like trying to get through a minefield with no map. That speaks to the merger requirements that are necessary within the Canadian banking system. This legislation still has put in too many of those minefields to allow Canadian institutions to compete on a global basis with the competition from other countries.
The Canadian financial services sector throughout the past 10 years has undergone more change than in the previous 150 years. At the same time Canadians have advanced legitimate concerns about their banking system, ranging from access to capital for small businesses in rural communities to creating a climate for increased competition in the provision of banking services.
In September 1998 the MacKay task force report provided a comprehensive set of recommendations which successfully balanced consumer interests with the global competitiveness of our financial services sector. In his response the Minister of Finance has focused only on short term consumer interests and has ignored the long term interests of all Canadian consumers. In fact, given the timidity with which the minister has handled his response to the MacKay report, there is no reason that Bill C-38 could not have been introduced in 1994.
In framing public policy, it is very important that it reflects realities as opposed to perceptions. There are many widely held misconceptions about the Canadian banking industry. The reality is that Canadian banks are delivering good value to Canadians.
We enjoy one of the most stable and efficient banking systems in the world. Canadian banks are widely owned by Canadians. Some 7.5 million Canadians have invested in banks. These 7.5 million working Canadians are relying on their bank shares to provide for retirement savings, or for that matter, investment income.
Furthermore the financial services sector employs over half a million Canadians. Its payroll, as I mentioned earlier, is $22 billion. It represents 5% of the total GDP.
Components of this important piece of legislation include allowing single shareholders to own 20% of voting shares of the big five banks, up from the current level of 10%. These banks, however, have to keep Canadian headquarters and their boards have to be three-quarters Canadian. That is a good component of this legislation, an increase from 10% to 20% ownership.
It allows banks to set up a holding structure which could then have separately regulated subsidiaries, including retail banks, credit card companies and insurance firms. That is a wise move on the part of this legislation.
Banks with between $1 billion and $5 billion in assets would be allowed to have controlling shareholders with stakes of up to 65%. The current rule is a single shareholder can own no more than 10%. Banks that fall into this category include the Laurentian Bank, the National Bank and Canadian Western Bank. Ministerial approval would still be needed to approve any takeover, which would effectively shield these banks from hostile takeovers.
We heard earlier about some concerns with respect to the power of the ministerial rights and we agree with that. We believe that the minister has substantive powers built into this legislation. It is one of the areas we would like to see changed quite dramatically going into the committee and going into the hearings. We would like to hear from the stakeholders as to how they feel that after all the processes have been followed it will be the minister who will make the final decision. It was said earlier that it should be parliament that has the say in those decisions, not just the minister.
There will be a new federal ombudsman established to handle complaints who will be independent of the existing banks. His or her ruling would not be binding on the banks, but the ombudsman would have the authority to make the complaints public. That is very positive.
There will be a new consumer finance agency. The agency will be established to strengthen the overseeing of banks. This new agency would be an advocate for consumer issues in the financial services industry.
All consumers will have the right to basic banking accounts and standard services at a low cost. This is in response to past complaints that the poor have had difficulty in gaining bank accounts. This is a positive change and one which the PC Party wholly supports. It was also one of the changes which the hon. member for Regina—Qu'Appelle indicated was a very positive step forward in this legislation. That is why I find it very difficult that the member would not see fit to support this legislation to go forward to committee so that this one area of the legislation could continue forward and be a very important part of the new regulatory system for the banking industry.
This legislation, however, fails to put into place a less arbitrary and political process for bank mergers. We have already heard from the Liberal government experts and the people who sit on the committee, those beacons of knowledge across the floor who have uttered such phrases as “I don't imagine we are going to look at a bank merger proposal anytime soon”. I find it difficult to recognize that these people, who are the experts in the financial industry, are now suggesting that bank mergers are not a part of the future. Mergers are a part of the future, have been a part of the future and are certainly going on as we speak today internationally as well as in the United States.
In addition to putting mergers on hold indefinitely and loosening share ownership restrictions, which could result in foreign control of the Canadian banking sectors, Bill C-38 does not adequately address the competition issue. If the government was serious about increasing competition it would have adopted the MacKay recommendations that the interact network become fully accessible and fully functional. Full functionality of the interact network would effectively provide any new bank with 14,000 access locations.
According to the government the aim of the bill is to allow banks to evolve to meet competition and at the same time protect consumers. I would argue, however, that due to the government's slow reaction to the changes in the financial services sector Canada has already fallen far behind. The one thing that is clear is that after years of uncertainty from the current government it has finally added some clarification and stability to the banking industry.
The PC Party of Canada will be supporting this bill. We feel that this is the first tiny step in the right direction.